Bayer, Germany's largest drugs maker, said it plans a "signficant'' increase in pharmaceutical research spending next year, as the company nurtures a stable of promising new drugs and pursues industry leaders Merck and Novartis.
Marijn Dekkers, the Bayer chief executive, said the company, which is based in Leverkusen in northwest Germany, plans to boost its research budget from €3.5 billion ($4.3 billion) this year. At a news conference on Tuesday to discuss the firm's research activities, Mr. Dekkers declined to give specifics on the increase, citing ongoing budget discussions for the coming year.
Research spending plummeted at Bayer in the early 2000s as a result of the controversy surrounding its Lipobay anti-cholesterol treatment, which was withrdawn from the market in 2001 amid reports of adverse reactions in the United States. But over the last years, the German company has steadily boosted research spending, to €3.2 billion last year.
Bayer currently spends nearly two-thirds of its total research budget – €1.9 billion – on its core pharmaceuticals business, but that amount is still only 16 percent of its total drugs sales.
Bayer currently spends nearly two-thirds of its total research budget – €1.9 billion – on its core pharmaceuticals business, but that amount is still only 16 percent of its total drugs sales – a lesser amount than the roughly 20 percent of sales invested by rivals Roche and Novartis on research.
Bayer has ample opportunity to spend more money on its pipeline of new medicines. Mr. Dekkers said the company had five new drugs that may be admitted next year into the decisive third phase of clinical development. In general, drugs must demonstrate their effectiveness and safety in three clinical studies to be approved for commercial sale. This development journey typically lasts several years.
Bayer's research pipeline includes promising new treatments for heart disease and cancer, which are partly based on newly created chemical molecular structures that have not yet been approved for general use. Because the drugs under development have such potential broad effectiveness in treating a variety of heart ailments and cancers, their commercial application is considered to be great, said Kemal Malik, the Bayern board member in charge of innovation.
Mr. Malik declined to estimate the commercial sales potential of the five medicines under development.
Bayer's drug business – which accounted for roughly 46 percent of the company's sales in the third quarter – is its fastest growing and most profitable business besides its agricultural and commodities chemicals businesses. Sales in its Health Care subgroup rose 4.6 percent to €4.96 billion in the third quarter and Bayer booked €1 billion in earnings before interest and taxes, the lion's share of €1.4 billion in pretax profit for the entire company.
Xarelto, a new anti-coagulant that was approved in 2011 as a preventative therapy for strokes, is one of the company's most promising drugs.
In the first nine months of this year, Xarelto had sales of almost €1.2 billion.
Bayer estimates the combined peak sales potential of its five top drugs under development, once they come on the market, at €7.5 billion.
In over-the-counter drugs, Bayer is integrating the consumer care businesses it recently acquired from U.S. Merck and anticipating further sales growth. The purchase of Merck's business will elevate Bayer to the world's No. 2 in non-prescription drugs after the combined businesses of Novartis and Glaxo.
Beyond its drugs business, Bayer is also benefitting from innovation in its crop treatment business, where it has developed 30 new products since 2000. The range of new farm chemicals has helped Bayer boost sales in crop treatments on average by 10 percent a year since 2010.
Kevin O'Brien is the editor in chief of Handelsblatt Global Edition. Maike Telgheder covers the pharmaceutical industry for Handelsblatt. To contact the authors: [email protected] and [email protected]